Great blog posts about macroeconomics

The move of Businesses to Texas.. Is California in economic danger?

Recently Texas Gov. Rick Perry has been campaigning to promote his state as the perfect place for businesses seeking lower taxes and eased government regulation. This campaign has moved major companies such as Occidental Petroleum Corp., Toyota, and potentially Sriracha hot sauce from California to major cities in Texas.

With Toyota alone moving it’s U.S. headquarters to outside of Dallas the company is also relocating about 3,000 jobs from the Los Angeles. Although about 2,300 jobs will remain in California, there will be an economic downturn. “If all these great, high-end jobs are leaving California, then we are going to turn into a place that’s a retirement community with low-paying service-sector jobs…We can’t have that,”

Although there was a statement issued by Gov. Jerry Brown’s Office of Business and Economic Development that emphasized California’s steady balance sheet and stating that jobs recovered after the recession, but the impact of giant companies is going to cause the need for something to shift. Either tax laws to reciprocate Texas’s or a complete reinventing of the long run way to supply to America.

Texas is currently ranked as a Top 10 Best State in the Tax Foundation’s 2013 State Business Tax Index due to having no corporate income tax and no individual income tax, making itone of the lowest tax burdens in the country. There were over 252 Thousand new jobs created in 2013. Are economies struggling because of all of the jobs left back in California or other states where companies had began?

Contrary to popular belief, research shows that California is actually doing better than one would think and Texas isn’t doing as well as it appears. Texas is criticized for creating low-paying jobs, while California has managed to maintain a big lead in certain high-growth, high-performing sectors, principally technology and entertainment.

It boils down to red-state politics versus blue-state. Texas’ economic success is attributed to low taxes and light regulation, when in reality the economic development is due to figuring out “how to combine the low-tax/low-regulation environment with financial incentives, the power of research institutions and the construction of critical infrastructure.” While blue-state politics like California believe tax and regulatory environment is not important because have the desirable “high-value-added” parts of the economy through other aspects such as quality of life, dense concentration, and highly skilled labor. California’s blue-state mindset works, but it doesn’t leave room for the middle class without some sort of taxes, which is why in the last five year we are seeing low-paying jobs and middle class workers moving to Texas.